Idearc has reported their results just days after RHD's, and the reports are very similar. They are both shrinking in revenues and profits (but both still with significant Operating Profits), but both have debt that will never be paid off at the current revenue and profit levels. As their businesses move online more and more, their Internet revenues are not making up for print revenue losses. They're both trapped in the space where they don't want to cannibalize their print revenue too much while they still have it, but are lagging on the Internet side for the same reason?
So what happens next? They have both mentioned bankruptcy, which is a realistic discussion because of the size of their debt and the current market for debt restructuring. The real question is will they really go bankrupt or is this a negotiating ploy? Or does it make a difference? In reality, neither of these companies is going to close the doors. The operating profits are still healthy and selling their assets will bring much less money to the debtholders than continued operation will. So, whether they go bankrupt or not, the only option seems to be for the debtholders to agree to forgive some of their debt, to allow the companies to continue to operate, and to be thankful they're getting paid whatever they get. Whether that happens in bankruptcy or not may be moot.
Of course, there's one more option too: Consolidation. YPC seems to be fairly healthy and could make an aggressive move to take an even larger lead, get national coverage, and try to take the dominant position in local, both on and offline. They already have a deal with Idearc to exchange listings. Could that be the first step?
Kelsey Group Blogs » Idearc Results Are Predictably Grim; Bankruptcy an Option
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